Negotiators Continue Work on Details of Tax-Cut Plan
While the spotlight in Washington is concentrated on the battle over the federal debt ceiling, House and Senate leaders continue to hammer out a compromise plan for promised tax cuts within the context of a balanced budget by 2002.
“We have come up with a very good compromise and it will be announced [today],” Senate Budget Chairman Pete V. Domenici (R-N.M.) said on CNN’s “Late Edition.”
The sweeping budget legislation, which President Clinton so far maintains is unacceptable, aims to save nearly $1 trillion in federal spending by 2002 while allowing for $245 billion in tax cuts.
Republicans negotiators’ main sticking point on tax cuts is whether to make a $500-per-child tax credit retroactive to Jan. 1, 1995, instead of the January, 1996, date that both chambers OKd.
“That’s an open issue [that] may wind up being decided” on the House and Senate floors this week, said House Republican Conference Chairman John A. Boehner (R-Ohio).
Meanwhile, House and Senate negotiators have tentatively agreed to make a proposed cut in individuals’ top long-term capital gains tax rate--from 28% to 19.8%--retroactive to Jan. 1, 1995.
The House-passed balanced-budget legislation includes the Jan. 1 effective date, but the Senate’s version would make any capital gains tax cut retroactive only to Oct. 13, 1995.
House Ways and Means Chairman Bill Archer (R-Tex.) said that was unacceptable because taxpayers had made investment decisions based on the Jan. 1, 1995 effective date.
The House version of the bill would also adjust capital gains tax rates to avoid taxing gains that are solely due to inflation, a provision the Senate removed because it would mean a substantial loss of revenue to the Treasury. Boehner said negotiators have essentially agreed to split the difference between the bills: Indexing gains for inflation would begin in “a few years.”
One other provision still being debated Sunday was how much to reduce the top capital gains tax rate for corporations, now 35%. The new rate is likely to be either 25% or 28%.